Egerton Capital Trims Alphabet Stake to $715 Million Amid Hyperscaler Capex Scrutiny

London-based hedge fund Egerton Capital trimmed its holding in Alphabet Inc. during the third quarter of 2026, cutting the position across two consecutive months while retaining the company as one of its largest long equity investments, according to regulatory filings reported by Yahoo Finance (https://finance.yahoo.com/markets/stocks/articles/why-billionaire-armitage-trims-still-185518940.html?.tsrc=rss).

The sales reflect mounting scrutiny over how quickly hyperscale cloud providers will generate cash returns on the capital allocated toward artificial intelligence computing infrastructure, alongside internal management adjustments within Alphabet's senior AI leadership team.

Egerton held 2,099,142 shares of Alphabet valued at $715.26 million at the end of the third quarter, representing 7.28% of the firm's equity portfolio and ranking as its sixth-largest holding. Overall, the manager reported $9.82 billion in US-listed equity assets across 23 investments in its third-quarter 13F disclosure, with its top five positions accounting for 52.4% of the total book.

Egerton founder John Armitage, who established the firm in 1994 alongside William Bollinger after managing money at Morgan Grenfell, typically reduces equity exposures following operational setbacks or when market developments challenge an investment thesis. The manager initiated trims in a summer month and made additional reductions the following month as questions expanded over cloud infrastructure payback periods.

Despite trimming, Armitage continues to treat Alphabet as one of two core hyperscalers anchoring the portfolio. In discussions detailed on a podcast hosted by Norges Bank Investment Management chief executive Nicolai Tangen, Armitage noted that incumbent hyperscalers are likely to emerge stronger if smaller neocloud challengers falter. Armitage has also been skeptical of neocloud valuations, arguing that metrics based on enterprise value to EBITDA ignore hardware depreciation, which represents a primary cash cost in data center operations.

The fund's performance has trailed broader equity markets recently. The Schroder GAIA Egerton Equity fund, managed by Egerton, returned 1.8% through September 2026, compared to a 12.4% gain for the MSCI World index. Schroders attributed the lag to stock selection during broader tech selloffs, higher bond yields, and an equity market narrowly concentrated around a small group of artificial intelligence winners. In 2025, the fund returned 19.0% against an 18.4% index gain.

The ongoing question for Egerton and other institutional tech investors is whether Alphabet's accelerating capital outlays and auxiliary bets, including its Waymo autonomous driving unit, will deliver compounding returns that justify maintaining concentrated exposure through market volatility.